As stocks and Bitcoin have reversed some of their resulted in increases, the cryptocurrency market is down today because investors wait for this week’s FOMC meeting and the declaration of the subsequent interest rate hike.
The cryptocurrency market is down today as market volatility rises ahead of the Federal Open Market Committee (FOMC) meeting on February 1 as a slew of unfavorable news stories pressures the values of Bitcoin, Ether, and other cryptocurrencies.
Bitcoin and Ether retraced a chunk of their recent gains after soaring to fresh 2023 highs.
Investors’ anxiety over the approaching FOMC interest rate decision appears to be the main reason which is why the cryptocurrency market is down, and comparable pullbacks are also being seen in the overall down stock market.
After the US Department of Justice announced on January 18 that it had taken enforcement action against Bitzlato and increased pressure on some participants in the cryptocurrency market, Binance began to restrict the accounts of specific users.
Cryptocurrency and stock prices initially benefited after a Consumer Price Index (CPI) print that showed inflation falling more than anticipated in December 2022, but as retail data fell short of forecasts and earnings dropped, prices started to dip.
U.S. stocks decline before the FOMC is the reason why the cryptocurrency market is down
The Dow and S&P 500 remain closely associated with the price of cryptocurrencies. As previously indicated, macro and cryptocurrency markets rose after a CPI report that was stronger than expected, but as reported earnings revealed a downturn in corporate profits and consumer demand, old worries about the state of the U.S. and worldwide economies returned.
In 2023, the majority of the country’s top banks continue to predict a severe recession in the United States.
Uncertain legislation and U.S. enforcement have an impact on the cryptocurrency business.
There is a long history of conflict between the bitcoin sector and regulators due to multiple misconceptions or doubts over the true use case of digital assets.
The Russian exchange Bitzlato was shut down by the US Department of Justice on January 18. The DOJ’s first declaration hinted at tough measures against the cryptocurrency industry, but it was vague.
The inquiry into Bitzlato prompted Binance, the largest centralized exchange (CEX) by volume, to decide to block some accounts on January 30. FinCEN classified Binance as one of the top Bitcoin counterparties of Bitzlato, despite Binance’s claims that “funds are safe.”
Since there is no operational framework for the regulation of the cryptocurrency sector, different countries and jurisdictions have a variety of conflicting policies regarding how cryptocurrencies are classified as assets and precisely what makes a legal payment system.
According to many observers, the mainstreaming of cryptocurrencies cannot occur until a more comprehensive set of regulations is adopted because the lack of clarity on this matter prevents growth and innovation within the sector.
Although the Commodity Futures Trading Commission (CFTC) has advocated for more transparent regulation, it is unclear how quickly these reforms will occur. In its plan for cryptocurrencies, the Biden Administration recommends discouraging pension funds from making high-risk investments.
Risk assets are significantly impacted by investor sentiment, and Bitcoin and other cryptocurrencies are no exception to this rule. As of now, the prospect of unfavorable regulation of cryptocurrencies or, in the worst-case scenario, an outright prohibition continues to have an effect on their pricing on a practically monthly basis.
Recently, regulators have focused on Gemini and Digital Currency Group because of the Earn program, which has the potential to significantly harm the cryptocurrency market. Sam Bankman-Fried, the former CEO of FTX, may have established a bad precedent for cryptocurrencies through his trial.
Profiting from Bitcoin’s 44% monthly increase
The price of bitcoin reaching $24,000 on January 29, 2023, has gotten off to a fantastic start for bitcoin and the cryptocurrency industry, with 64% of BTC investors making a profit. Even struggling Bitcoin miners experienced enormous growth, with sales increasing by 50% to $23 million, indicating a turnaround for the troubled sector.
Top cryptocurrency investors predict further sell-offs, while Bitcoin analysts continue to issue cautionary statements about the continuation of the long-term decline. Some traders believe that at some point in the near future, the value of BTC will retrace to the CME futures “gap” located below $20,000 in the value of BTC.
Investors’ appetite for risk is likely to remain low in the interim, so prospective cryptocurrency traders may want to hold off until there are indications that US inflation has peaked or until the Fed indicates that smaller-scale interest rate increases are on the horizon. A more open regulatory roadmap for the cryptocurrency business would also assist to boost confidence in the area.
Also read: Why Is Bitcoin’s Price Rising Right Now?